Bruce Everett, adjunct associate professor of international business at The Fletcher School of Law and Diplomacy and the Georgetown School of Foreign Service, this weekend moderated a panel at Tufts Energy Conference. He formerly worked for ExxonMobil Corporation and the U.S. Department of Energy. Everett sat down with the Daily to discuss energy policy. Katherine Sawyer: Why do you think energy independence might not be the answer? Bruce Everett: I start with the premise that low−cost energy is critical to the economy, and it is particularly critical in the United States because we are a highly mobile society … If we had domestic sources of energy that were only slightly more expensive that imported oil, then you could make an argument that the geopolitical problems which are very real that are associated with being involved in this market might induce us to say, OK, let’s pay a little bit more. The problem is that oil is a transportation fuel, and we have no viable alternatives.
So if we want to move towards energy independence, we have to take two steps. This first of which makes perfectly good sense — we produce as much domestic oil as we can. And we refuse to do that … But the second thing is that we would have to substitute expensive domestic energy for cheap foreign energy … So what we would end up doing is saddling our own economy with lower growth for very questionable purposes … The United States is a trading nation, and the idea that we can just somehow stay out of the world’s problems by just retreating from that I think makes no sense. And as a result, what we don’t want to do is to get in the worst possible position, which is taking a few steps towards energy independence which are extremely expensive and don’t really make any difference … We need to look for solutions, but where you don’t want to be is to spend a lot of money for no results. KS: Can we afford to use fossil fuels? BE: … [Climate change] is now the primary argument that people offer against the use of fossil fuels, and it’s unfortunate in many ways. This is one of the oddest public policy debates I have ever seen.
We have a situation in which we have an important scientific hypothesis [regarding greenhouse gases]. Now the evidence in support of this is distinctly mixed. And I believe that is factually true. What has happened is that we have a group of people — very smart, very well intentioned and very well trained in science — who have made it their life’s work to convince us to reduce carbon emissions. And as a result they have gone from looking at this problem scientifically to just looking at it as political advocacy. And they have basically taken the position that we not only believe we are correct, but we are absolutely correct and therefore we don’t want any public debate on this issue … We don’t do that for other things. The information is just too ambiguous at this point to draw a conclusion … we simply don’t understand this problem very well at all.
… One of the arguments that is frequently made is that as an insurance policy, we ought to do something in case this is right. This is a good argument. We all take reasonable precautions in our lives. But the critical part of this is the word reasonable. Now in my research … I have concluded that you can get small amounts of carbon reduction very inexpensively, but if you want to force large amounts of carbon reduction, it is going to be incredibly expensive. And it’s going to hurt the economy.
Now look around the world and what we see is … a lot of rhetoric about climate change, but we don’t see them actually doing anything … So if the United States makes a decision that we are going to reduce our carbon output at … tremendous cost to our economy while everybody else doesn’t do it, the result will be … we will have spent a lot of money and hurt ourselves and we will get nothing for it. To actually reduce atmospheric carbon, every country would have to contribute, and they are simply not prepared to do it.
There are some things I would do and it seems to me that it is sensible to look for carbon reductions and I think we need a nuclear power program in the United States … I think we need to use the natural gas resources that we have … and I think things like pricing electricity correctly, would allow us to use it much more efficiently. The idea of suddenly engineering a massive carbon reduction in just our country makes no sense to me at all. KS: What do you think about the United States acting as a leader on this issue? BE: The Kyoto Protocol is filled with accounting tricks. These are fraudulent. The bills that are currently in Senate would … put some cost on the economy, not have any measurable impact on carbon, but would allow politicians to say, look what we have done, we have solved the problem. So there is no evidence that the United States shooting ourselves in the foot economically would induce other countries to do the same things… KS: Why are you not in favor of gas taxes? BE: We learned something very interesting in 2008 … when gasoline prices started to reach around $4. It’s going to take $4 a gallon to do that. If we put on a dollar tax, that’s $140 billion a year of liquidity that’s drained out of the economy and given to the government … which will not spend it appropriately … What you have done is significantly increased the size of government, you have drained liquidity of out the market exactly at a time when we need to restore economic growth and you will get a measurable but small impact on our oil consumption … If in order to reduce imports by a small amount, you have to severely hamper the economy, I don’t see what that does for you.
…I think there are lots of sensible things we ought to do … but we ought to be reasonably humble in our aspirations for what we are able to accomplish through policy and stay with what has gotten the United States to where we are today, which is free market institutions. So a little bit of government policy intervention is a good thing … but it ought to be done with an appropriate level of humility. We just need to be careful and realistic.